Australia AiG PMI dropped to -2.1, wage index at lowest since Mar 2017

By

-

Jun 03 19, 04:03 GMT

Australia AiG Performance of Manufacturing Index dropped -2.1 pts to 52.7 in May, suggesting a slower rate of growth. Looking at the details, production dropped sharply by -6.9 to 51.2. New orders dropped -3.3 to 52.3. exports dropped -3.6 to just 40.3. Employment index staged a strong rebound and rose 4.1 to 55.6. But average wages dropped -2.2 to 55.5. Input prices rose 3.6 to 68.3 but selling prices dropped -2.8 to 52.1.

In particular, on wages, 55.5 is the lowest monthly results since March 2017 and is well below historical average of 59.2. This index has been trending lower since its recent peak in September 2018. It indicates that fewer manufacturing businesses are now implementing wage rises, compared to the recent peak in Q3 of 2018.

Full release here.

Also from Australia, TD Securities inflation rose 0.0% mom in May. Company operating profit rose 1.7% qoq in Q1.

China reiterated known pre-conditions for resuming trade talks with US

By

ActionForex

-

Jun 02 19, 15:06 GMT

China’s highly anticipated white paper on trade relationship with US was quite anti-climatic. In short, China blamed the US for starting trade conflicts. And, it criticized the US for going back on what’s agreed three times. And it hold US totally responsible for the collapse of trade negotiation.

China also reiterated pre-conditions on resuming trade negotiations. First, both sides have to respect “each other’s social system, economic system, development path and rights”. Secondly the negotiations has to be based on integrity. Thirdly, China will not step back on its principles, including sovereignty.

The implications are quite clear that China will not do anything to change its own development path along socialist market economy (or some would call that state capitalism). That is, China will not retreat from subsidizing State-Owned Enterprises. Secondly, the implementation of the agreement should be under full control of the sovereign entity. That is, for example, China will decide what new laws to pass to curb IP theft, or it will fulfil the commitment with administrative measures. China will object to US instructions on what are to be done exactly.

The overall paper, and the press conference are basically old wine in old bottles.

Full paper in Simplified Chinese.

Mexico doesn’t want war of tariffs and of taxes with US

By

ActionForex

-

Jun 02 19, 14:42 GMT

Mexico’s Economy Minister Graciela Marquez is going to meet US Commerce Secretary Wilbur Ross in Washington on Monday to discuss Trump’s tariff threats. Foreign Minister Marcelo Ebrard will also be in Washington on Wednesday for the issue.

Mexican President Andres Manuel Lopez Obrador expected “good results” from the meetings. And he said on Saturday that “the main thing is to inform about what we’re already doing on the migration issue, and if it’s necessary to reinforce these measures without violating human rights, we could be prepared to reach that deal.”

Lopez Obrador also insisted that Mexico would not pursue trade war with the US. And, “we’re doing all we can to reach a deal through dialogue… we’re not going to get into a trade war, a war of tariffs and of taxes.”

EU Moscovici wants dialogue with Italy on budget, Tria doesn’t want clash

By

ActionForex

-

Jun 02 19, 13:55 GMT

European Commissioner for Economic and Financial Affairs Pierre Moscovici said on Sunday that he’d still prefer dialogue with to sanctions on Italy regarding it’s budget. And, “for the past five years I have not punished anyone.” However, he emphasized “If they do not respect the rules at all, it will be necessary for the European Commission and the European states to take their responsibilities”. The Commission will make proposals this week on resolving the dispute with Italy over its budget deficit.

Italy’s Economy Minister Giovanni Tria blamed the economic downturn for rising debt. However, he also emphasized “Italy does not want to clash with the European Commission, and I hope the opposite is also true, that is to say that no one in Brussels intends to engage in a fight with us.” He reiterated the pledge to keep budget deficit below government forecast of 2.4% of GDP. And he added “our position is reasonable and I think we will eventually reach a compromise with the Commission.”

Trump: Tariff is about stopping drugs as well as illegals!

By

ActionForex

-

May 31 19, 14:37 GMT

Trump continued his tariff threat on Mexico with his tweets. He blamed Mexico has “advantage of the United States for decades” and “makes a fortune” for decades. And it’s “time for them to finally do what must be done.

Further, he said if tariffs start rising, “companies will leave Mexico, which has taken 30% of our Auto Industry, and come back home to the USA”. And “Tariff is about stopping drugs as well as illegals!”

Sounds like tariff is the universal cure for everything!

By loading the tweet, you agree to Twitter’s privacy policy.
Learn more

Load tweet

Always unblock Twitter Tweets

By loading the tweet, you agree to Twitter’s privacy policy.
Learn more

Load tweet

Always unblock Twitter Tweets

Canada GDP grew 0.5% mom in March, 0.4% annualized in Q1

By

ActionForex

-

May 31 19, 12:52 GMT

Canada GDP grew 0.5% mom in March, , well above expectation of 0.3% mom. Goods-producing industries were up 0.7%, offsetting most of the decline in February, while services-producing industries (+0.4%) posted their strongest increase since May 2018. There were gains in 16 of the 20 industrial sectors.

For Q1, GDP grew an annualized 0.4%, well below expectation of 0.7%. Growth in real GDP was driven by a 0.9% increase in household spending and an 8.7% rise in business investment in machinery and equipment. These increases were moderated by a 1.0% decline in exports, coupled with a 1.9% increase in imports. Additionally, investment in housing continued to decline, down 1.6% in the first quarter.

US personal income rose 0.5%, spending rose 0.3%, core PCE at 1.6%

By

ActionForex

-

May 31 19, 12:48 GMT

In April, US personal income rose 0.5% or USD 92.8B, above expectation of 0.3%. Spending rose 0.3% or USD 42.7B, above above expectation of 0.2%. Headline PCE rose to 1.5% yoy, up from 1.4% and matched expectations. Core PCE inflation rose to 1.6% yoy, up from 1.5% yoy and matched expectations.

Little reaction is seen in Dollar after the release. The question remains on whether inflation will “persistently” miss 2% target that eventually force a Fed cut. For now, there is no clear evidence for that yet. The greenback might need to look at ISMs and NFP next week for more inspirations.

Full release here.

China’s unreliable entities list on the way as countermeasures to US

By

ActionForex

-

May 31 19, 12:07 GMT

Just as the Chinese Communist Party run hawkish tabloid Global Times warned that “major retaliative measures’ on US for Huawei are underway, the Commerce Ministry announced to set up a list of “unreliable entities” targets companies that violate market rules, cut off supply to the country.

The ministry noted that for non-commercial purposes, some foreign entities impose blockades, confessions and other discriminatory measures against Chinese enterprises and damage their legitimate rights and interests”. Such entities endanger China’s national security and interests, and also pose a threat to global supply chain. Detailed measures regarding the list will be announced later.

Off shore Chinese Yuan is back under pressure today, with USD/CNH hitting as high as 6.9472 so far. 6.9488 resistance is back in focus. Overall, we’re not expecting a sustainable top in USD/CNH at current level, not even at the psychologically important 7 handle.

There were talks that USD/CNH above 7 would cause serious capital outflow and risks delaying internationalization of the Yuan. But it’s also noted that the government has implement measures already, including tighter compliance requirements. For, we’d believe that all the official would try is only slowing Yuan’s decline, rather than blocking it.

Pound selloff resumes with EUR/GBP upside breakout

By

ActionForex

-

May 31 19, 10:05 GMT

Pound’s selloff resumes today and it’s for now the second weakest, just next to Canadian. The decline is rather unrelated to today’s main theme of Trump’s tariff on Mexico. Rather, Sterling is on its own downward trajectory on Brexit uncertainty. Prime Minister Theresa May will step down on June 7. Nominations will start in the week on June 10. That’s the week we’ll finally know who are the real runners.

EUR/GBP breaks out of this week’s sluggish range and hits as high as 0.8866 so far. With 0.8840 resistance now firstly taken out, next stop will be 0.9101 key resistance.

GBP/USD is also on track for 1.2391 low.

GBP/JPY is also targeting 131.51 low even that flash crash low looks a bit far.

German 10-year yield hit record low, EUR/CHF at critical juncture

By

ActionForex

-

May 31 19, 09:12 GMT

German 10-year bund yield dives sharply to new record low in the wake of Trump’s action to use tariffs to force Mexico to fix border security problem of the US. 10-year bund yield hits as low as -0.206 and is currently down -0.031 at -0.202.

European stocks are broadly lower, with FTSE currently down -0.95%. DAX down -1.60% and CAC down -1.23%. DOW future is currently down -250 pts and is set to lose 25000 handle again at open.

Yen and Swiss Franc surge on risk aversion naturally. A key focus is weakness in EUR/CHF, which is having its sight back on 1.1162 low. Firm break there will extend the fall from 1.2004. More importantly, it will then argue that such decline is not a correction but part of a long term down trend. And in that case, we might see EUR/CHF heading back to 1.0629 support in medium to long term.

Japan unemployment rate dropped, so was consumer confidence

By

ActionForex

-

May 31 19, 05:47 GMT

The batch of economic data released from Japan today is mixed. Unemployment rate dropped to 2.4% in April, down from 2.5%, matched expectations. However, better employment was not reflected in retail sales nor consumer sentiment. Retail sales rose 0.5% yoy, missed expectation of 1.0% yoy. Consumer confidence dropped to 39.4, below expectation of 40.6.

Meanwhile, industrial production rose 0.6% mom in April, above expectation of 0.2% mom. However, the road ahead could be bumpy with trade war escalation in May. Housing starts dropped -5.7% yoy in April, below expectation of -0.8% yoy. Tokyo CPI core slowed to 1.1% yoy in May, down from 1.3% yoy and missed expectation of 1.2% yoy.

Yen is the strongest one for today so far, mainly thanks to Trump’s announcement to use tariff to curb illegal immigration through Mexico. USD/JPY drops through 109.02 support finally. Fall from 112.40 is resuming for 61.8% retracement of 104.69 to 112.40 at 107.63 next.

China PMI manufacturing dropped to 49.4, widening decline, increasing downward pressure

By

ActionForex

-

May 31 19, 05:40 GMT

The official China PMI manufacturing dropped to 49.4 in May, down from 50.1 and missed expectation of 49.9. It further confirmed that March’s recovery was a false dawn and the slowdown trajectory in China is ongoing. More importantly, deterioration could quick further with the current round of US-China trade war escalation. Non-manufacturing PMI was unchanged at 54.3.

Analyst Zhang Liqun noted that “the decline was widening, indicating that the downward pressure on the economy has increased.” And, “foundation for economic stabilization has not yet been established.” In particular, new orders index, the export order index decreased significantly, “reflecting the lack of market demand is more prominent, especially the downward pressure on exports”.

Looking at some details:

Production dropped -0.4 to 51.7;
New order dropped -1.6 to 49.8;
New Export order dropped -2.7 to 46.5;
Import dropped -2.6 to 47.1;
Employment dropped -0.2 to 47.0.

Full release here.

Trump uses tariffs to stop illegal migrants through Mexico

By

ActionForex

-

May 31 19, 05:24 GMT

The highly anticipated “big league statement” of Trump regarding border security turned out to be announcement of the same old “one-trick”. In a rather shocked, he announced, by his tweets, to impose 5% tariff on all Mexican imports, “until such time as illegal migrants coming through Mexico, and into our Country, STOP.” And the tariff will “gradually increase until the Illegal Immigration problem is remedied”.

In the more detailed announcement by the White House, Trump said he was “invoking the authorities granted to me by the International Emergency Economic Powers Act.”. Starting June 10, 5% tariff will be imposed on all goods imported from Mexico. If the “crisis persist”, tariffs will be raised to 10% on July 1, then 15% on August 1, 20% on September 1, and 25% on October 1.

He further warned: “If Mexico fails to act, Tariffs will remain at the high level, and companies located in Mexico may start moving back to the United States to make their products and goods. Companies that relocate to the United States will not pay the Tariffs or be affected in any way.”

Full White House statement here.

BoC Wilkins: Trade war is a wild card and our major preoccupation

By

ActionForex

-

May 31 19, 04:57 GMT

BoC Senior Deputy Governor Carolyn Wilkins reiterated the central bank’s view that ” the slowdown in late 2018 and early 2019 was temporary.” However, “global trade risks have increased”. Thus, the current accommodation provided by BoC remains “appropriate”. And upcoming rate decisions will remain data dependent, with attention to “household spending, oil markets and the global trade environment.”

She described trade war as the “wild card” on global and domestic outlook. “How costly are trade wars for the global economy? In April, we said tariffs over the past two years and trade policy uncertainty would chop 0.4 per cent from global GDP by the end of 2021—that’s about US$350 billion. While this can only be a rough estimate, we know it matters more for trade-dependent economies like Canada’s.”

Wilkins noted the positive development that US has dropped steel and aluminum tariffs recently, increasing chance of ratification of USMCA. But “other developments are discouraging”, with US and China escalated their dispute and Canada “caught in the crossfire”. She also noted the “potential for more friction between the United States and European Union.”

She warned “if the disputes were to worsen and become long lasting, the outlook would be quite different. Not only would we see weaker economic demand, but the supply side of the economy would also take a hit as companies deal with disruptions to their supply chains. Obviously, this remains a major preoccupation for us.”

Wilkin’s full speech here.

Fed Clarida: Interest rate consistent with Talyor-type rule results

By

ActionForex

-

May 31 19, 04:45 GMT

Fed Vice Chair Richard Clarida reiterated the view that US economy is in a “very good place”. Also current interest rate lies in the range of neutral and remain appropriate. Softness in recent inflation is seen as “transitory”. Though, he also outlined the conditions for a rate cut, in persistent inflation miss or deterioration in global economic financial developments.

In a speech delivered yesterday, he said “the U.S. economy is in a very good place, with the unemployment rate near a 50-year low, inflationary pressures muted, expected inflation stable, and GDP growth solid and projected to remain so.”

Also, the federal funds rate is now in the range of estimates of its longer-run neutral level, and the unemployment rate is not far below many estimates of u*. And, “plugging these inputs into a 1993 Taylor-type rule produces a federal funds rate between 2.25 and 2.5 percent, which is the range for the policy rate that the FOMC has reaffirmed”.

Fed’s decision to leave interest rate unchanged in May “reflects our view that some of the softness in recent inflation data will prove to be transitory.”

Nevertheless, Clarida also noted “if the incoming data were to show a persistent shortfall in inflation below our 2 percent objective or were it to indicate that global economic and financial developments present a material downside risk to our baseline outlook, then these are developments that the Committee would take into account in assessing the appropriate stance for monetary policy.”

Clarida’s full speech here.

WTI oil heading back to 56.92 after brief and weak recovery

By

ActionForex

-

May 30 19, 15:36 GMT

WTI crude oil drops sharply as data show less than expected decline in oil inventory. In the week ending May 24, commercial oil inventories decreased by 0.3 Mbarrels only, versus consensus of -0.9M. WTI is quickly back below 58 handle after the release.

As follow up to last post here, WTI did recover after trying to draw support from 38.2% retracement of 42.05 to 66.49 at 57.15. However, as the subsequent recovery was limited well below 60.03 support turned resistance, there is no sign of bottoming yet. Focus is immediately back on 56.92 temporary low. Break there will extend the fall from 66.49 to 161.8% projection of 66.49 to 60.03 from 63.90 at 53.44.

For now, we’re still viewing the decline from 66.49 as a corrective pull back. Hence, while’s it’s likely deeper than expected, strong support should be found at 61.8% retracement of 42.05 to 66.49 at 51.38 to complete the correction.

If it happens that way, break of 56.92 in WTI should solidify the upside momentum in USD/CAD to retest 1.3664 high.

Trump: Americans paying very little of tariffs, China is subsidizing

By

ActionForex

-

May 30 19, 13:59 GMT

On trade war with China, Trump insisted things are going well. He told reports at the White House that “China would love to make a deal with us. We had a deal and they broke the deal. I think if they had it to do again they wouldn’t have done what they did.”

On the tariffs, he said “China is subsidizing products, so the United States taxpayers are paying for very little of it.” And pointed to the little impact of tariffs on inflation.

Trump also said, “I think we’re doing very well with China.”

US trade deficit widened slightly to USD 72.1B, both exports and imports contracted

By

ActionForex

-

May 30 19, 13:04 GMT

US trade deficit widened slightly to USD 72.1B in April, up from USD 71.9B. Looking at the details, pretty much all category of of both exports and imports contracted. Overall exports dropped -4.2% to USD 134.6B. Imports dropped -2.7% to USD 206.7B.

Full table here.

US initial jobless claims rose 3k to 215k

By

ActionForex

-

May 30 19, 12:45 GMT

US initial jobless claims rose 3k to 215k in the week ending May 25, slightly above expectation of 214k. Four-week moving average of initial claims dropped -3.75k to 216.75k.

Continuing claims dropped -26k to 1.657M in the week ending May 18. Four-week moving average of continuing claims dropped -3.5k to 1.673M.

Full release here.

US Q1 GDP growth revised down to 3.1%, price index rose 0.8%

By

ActionForex

-

May 30 19, 12:40 GMT

US Q1 GDP growth was revised down to 3.1% annualized, from first estimate of 3.2%, matched expectations. GDP price index was revised down to 0.8% down from 0.9% and missed expectation of 0.9%.

Looking at the details, there were positive contributions from PCE, private inventory investment, exports, state and local government spending, and non-residential fixed investment. Imports also decreased. There was negative contribution from residential fixed investment.

The acceleration in GDP growth reflected an upturn in state and local government spending, accelerations in private inventory investment and in exports, and a smaller decrease in residential investment. These were partly offset by decelerations in PCE and nonresidential fixed investment, and a downturn in federal government spending.

Full release here.

Hawkish BoE Cut Lifts Sterling, Dollar Weakens on Soft CPI

Risk-Off Undercurrent Builds as BoE, ECB, CPI Crowd the Session

Sterling Avoids Heavy Selling So Far, Silver Power Continues

Sterling Slips as Faster UK Disinflation Firms Up BoE Cut Case

Live Comments

Australia AiG PMI dropped to -2.1, wage index at lowest since Mar 2017

China reiterated known pre-conditions for resuming trade talks with US

Mexico doesn’t want war of tariffs and of taxes with US

EU Moscovici wants dialogue with Italy on budget, Tria doesn’t want clash

Trump: Tariff is about stopping drugs as well as illegals!

Canada GDP grew 0.5% mom in March, 0.4% annualized in Q1

US personal income rose 0.5%, spending rose 0.3%, core PCE at 1.6%

China’s unreliable entities list on the way as countermeasures to US

Pound selloff resumes with EUR/GBP upside breakout

German 10-year yield hit record low, EUR/CHF at critical juncture

Japan unemployment rate dropped, so was consumer confidence

China PMI manufacturing dropped to 49.4, widening decline, increasing downward pressure

Trump uses tariffs to stop illegal migrants through Mexico

BoC Wilkins: Trade war is a wild card and our major preoccupation

Fed Clarida: Interest rate consistent with Talyor-type rule results

WTI oil heading back to 56.92 after brief and weak recovery

Trump: Americans paying very little of tariffs, China is subsidizing

US trade deficit widened slightly to USD 72.1B, both exports and imports contracted

US initial jobless claims rose 3k to 215k

US Q1 GDP growth revised down to 3.1%, price index rose 0.8%